Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.

dc.date.accessioned

2008-06-17T12:23:21Z

en_ZA

dc.date.accessioned

2010-07-09T11:08:52Z

dc.date.available

2008-06-17T12:23:21Z

en_ZA

dc.date.available

2010-07-09T11:08:52Z

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2008-03

en_ZA

dc.identifier.uri

http://hdl.handle.net/10019.1/3375

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Thesis (MComm (Business Management))--Stellenbosch University, 2008.

dc.description.abstract

Universities manage their administrative and financial operations traditionally by means
of cost centres in the form of faculties, departments and divisions. In these cost centres
financial performance is purely measured by comparing actual expenses with drawn up
budgets. During performance measurement only direct costs allocated to cost centres are
taken into account. Often, indirect costs are not taken into account which leaves an
erroneous impression about the real cost of a certain cost centre. However, it is of
importance for education managers to take cost management into consideration as a
primary tool to manage institutions of higher education. Accurate cost information is an
indispensable management aid, especially in a changing and dynamic environment.
During budget allocations mostly only direct costs are taken into account. This also
happens when the financial performance of academic departments, faculties and other
entities are measured. The utilisation of a full cost approach could add substantial value
to current management information.
The starting point of this study is by placing a perspective on problems arising from the
utilisation of cost allocation techniques by means of a case study from which activity
based costing and responsibility centre management can solve the problem. Throughout
this study it was attempted to emphasise the relevance between activity based costing and
responsibility centre management and the focus was on how both budget allocation
models could be applied in an integrated context.
During the allocation of income and indirect costs the question normally arises on which
basis these components are to be allocated to faculties and departments at a university.
Attention has been given to both these components to establish which method / basis is
the most applicable for the allocation thereof. The aim was to generally keep cost drivers
as simple as possible. The cost drivers used need to bear the approval of deans to ensure
the credibility of the budget allocation model. However, cost drivers could well be
investigated continually to consider their applicability against alternative cost drivers. The allocation of budget amounts to faculties stemming from the main budget of a
university is normally a dilemma. Therefore, a budget allocation model has been
developed taking the financial performance of faculties into consideration to determine
the budget allocation of each individual faculty.